Trump denied that the retirement program will change in the tax reform

Trump denied that the retirement program will change in the tax reform

The president of the United States, Donald Trump, yesterday ruled out the possibility of stopping a tax-deferred retirement savings program, called 401 (k), to pay for tax cuts to large corporations.

Trump denied that the retirement program will change in the tax reform

The US president had to clarify yesterday that he does not plan to eliminate tax deductions linked to a retirement savings plan used by millions of workers. He also expressed doubts about the possibility of adding another level of income tax (or profits) directed at wealthier Americans, which had been proposed by the Republicans.

The potential decline of the 401 (k) plans, which for four decades have covered millions of workers as a means of saving for retirement, is one of several important points that was added to the fiscal review agenda that Trump promised as a candidate and which now drives the officials of his Republican Party, which control Congress but only by a margin of 52 to 48, to approve before the end of the year.

The White House and its allies in Congress have raised the idea of ​​cutting certain tax deductions to offset the income that would be lost due to the proposed tax cuts, whose centerpiece is a drastic reduction in the corporate income tax rate .

Press recognized as the Wall Street Journal and the New York Times reported on Friday that Republicans were considering an annual cap of approximately $ 2,400 in pre-tax contributions to the 401(k) plans, this means approximately 13% of what workers under 50 currently contribute to the deferred tax base. That would drastically reduce the amount of money workers can save for retirement in 401(k) plans, which are normally invested in a mutual fund portfolio.

“There will be no change to your 401(k),” Trump wrote on Twitter. “This has always been a great and popular middle-class tax reduction that works, and stays!”

Altering the 401(k) plans, which have largely replaced defined-benefit pensions in the United States, would risk alienating tens of millions of workers. But this would also hurt Wall Street interests, because of the millions of fees they get from managing savings plans.

The Trump Tax Adjustment Plan involves giving up $ 6 trillion in tax cuts, a gift for the rich and corporate United States that would generate further growth of the federal deficit.

More than 94 million Americans are covered by defined contribution plans such as 401 (k), according to a recent study by asset manager Vanguard. The total assets in these plans exceed US $ 7 billion.

Democrats, aware of the attractiveness of tax cuts for many working-class Americans, including some who left the party in the 2016 elections, said the possible 401 (k) changes represented the elimination of retirement savings from the nation.

“This is going to devastate American families if we do not give people an incentive to save,” said Democratic Sen. Heidi Heitkamp on CNBC. “It’s absolutely the wrong direction.”

Securing congressional approval of its tax plan is extremely important to Trump, who has not yet achieved significant legislation in Congress since taking office in January, including health reform he also promised as a candidate last year.

The White House argues that tax cuts are necessary to boost economic growth and create jobs. As many analysts point out, such as Michael Roberts, this is false and it is not empirically demonstrated that the reduction of taxes generates more employment for companies, rather the opposite happens.

However, what would be holding back Trump in his tougher tax adjustment plans is the need to reach an agreement with the Democrats, who argue that the reform may endanger the long-term fiscal health of the United States.

Based on the outline of the plan released last month, independent experts have come to the conclusion that companies and higher incomes would benefit the most, and many people with higher average incomes would face higher taxes.

On the other hand, there are indications that Republicans can add a fourth level of income tax that affects those who earn the most with the tax plan. The proposal was presented by the Speaker of the House of Representatives, Republican Paul Ryan. The plan initially planned to reduce the number of square brackets to three of the current seven.

However, also with it Trump seemed to pour coldness on the idea. In an interview aired on Fox Business Network on Monday, the US president He said that “it may not happen.” “The only reason I would have (is) if for some reason I feel that the middle class is not being properly served.”

There is also pressure from investors to approve the tax review. The expectation of deep tax cuts has helped fuel a vertiginous stock rebound during Trump’s first year as president, with the S & P 500 index .SPX rising by more than 13%.